House to take up financial overhaul bill amid consumer-agency controversy

The House is slated on Friday to pass wide-ranging financial overhaul legislation as Democratic leaders look to overcome an effort to scuttle a new federal consumer protection agency.

One of the most closely watched votes in the debate will come on an amendment sponsored by Rep. Walt Minnick (D-Idaho) that would replace the proposed Consumer Financial Protection Agency (CFPA) with a council of existing regulators.

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The new agency is strongly backed by the Obama administration and House Financial Services Committee Chairman Barney Frank (D-Mass.). The agency would have the power to regulate home loans, credit cards and other financial products and has been fiercely opposed by the financial industry.

The U.S. Chamber of Commerce is running a multimillion-dollar campaign against the CFPA and strongly supports the Minnick amendment. The Chamber said on Thursday that it would key-vote the amendment, raising pressure on centrist Democrats to support it.

Consumer advocacy organizations and labor unions were urging lawmakers to oppose the Minnick amendment. Frank said this week that he expects the amendment to fail.

Meanwhile, on Thursday, the House agreed to a series of amendments, including one expanding the CFPA’s ability to pre-empt state regulations.

The pre-emption issue had held up debate on Wednesday before House leaders and centrist New Democrats reached a deal.

The House on Thursday also approved a series of amendments to alter new regulations on the multitrillion-dollar derivatives market.

The House passed an amendment supported by Reps. Scott Murphy (D-N.Y.), Mike McMahon (D-N.Y.) and Frank Kratovil (D-Md.). The measure is intended to broaden an exemption for end-users of derivatives, in particular large manufacturing companies. Centrist Democrats supported the amendment, which passed 304-124.

Lawmakers voted down a separate effort backed by Frank to give federal regulators authority to set margin requirements in swap transactions involving end-users. Big manufacturing and other business interests lobbied against the measure, which failed 150-280.

Another amendment that was intended to give federal regulators greater power to ban abusive swaps failed on a 150-279 vote.

One of the closest votes came on an amendment sponsored by Rep. Stephen Lynch (D-Mass.) that would prohibit firms' owning more than 20 percent of a clearinghouse that serves as a third party in derivatives transactions. The amendment passed on a 228-202 vote.

Frank, AFL-CIO and other consumer groups supported the amendment. Big banks control more than 90 percent of the derivatives market, according to the Office of the Comptroller of the Currency (OCC), and the amendment’s supporters were concerned that banks would wind up controlling the clearinghouses that oversee the trades.

McMahon, a centrist Democrat, opposed the amendment, arguing that it would unfairly benefit certain major companies. Critics have said that some companies, such as NASDAQ, would benefit. Other industry associations and bank lobbyists opposed it.

"We have worked very hard with members of Congress to ensure that stronger oversight of these markets leads to a reduction in systemic risk,” said Cory Strupp, managing director at the Securities Industry and Financial Markets Association (SIFMA). “This amendment is simply a special interest giveaway that benefits a few at the expense of the entire market."

The House is also slated on Friday to vote on an amendment that would remove an exemption for public companies with $75 million or less in assets from audit requirements under the Sarbanes-Oxley Act.